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    BEPS Brief Introduction

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    Alan Tsang
    Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit mismatches in tax rules to artificially shift profits to low or no-tax locations. While some current BEPS practices are illegal, most are legal. BEPS undermines tax system fairness and integrity and reduces government revenues. Over 135 countries are collaborating under an OECD framework to implement 15 actions addressing BEPS through changes to tax treaties, transfer pricing, and transparency. Corporations may need to modify structures, operations, and documentation in response to BEPS outcomes.

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    BEPS Brief Introduction

    Uploaded by

    Alan Tsang
    33 views11 pages
    Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit mismatches in tax rules to artificially shift profits to low or no-tax locations. While some current BEPS practices are illegal, most are legal. BEPS undermines tax system fairness and integrity and reduces government revenues. Over 135 countries are collaborating under an OECD framework to implement 15 actions addressing BEPS through changes to tax treaties, transfer pricing, and transparency. Corporations may need to modify structures, operations, and documentation in response to BEPS outcomes.

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    Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit mismatches in tax rules to artificially shift profits to low or no-tax locations. While some current BEPS practices are illegal, most are legal. BEPS undermines tax system fairness and integrity and reduces government revenues. Over 135 countries are collaborating under an OECD framework to implement 15 actions addressing BEPS through changes to tax treaties, transfer pricing, and transparency. Corporations may need to modify structures, operations, and documentation in response to BEPS outcomes.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    33 views11 pages

    BEPS Brief Introduction

    Uploaded by

    Alan Tsang
    Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit mismatches in tax rules to artificially shift profits to low or no-tax locations. While some current BEPS practices are illegal, most are legal. BEPS undermines tax system fairness and integrity and reduces government revenues. Over 135 countries are collaborating under an OECD framework to implement 15 actions addressing BEPS through changes to tax treaties, transfer pricing, and transparency. Corporations may need to modify structures, operations, and documentation in response to BEPS outcomes.

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    © All Rights Reserved
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    of 11

    AC 4251

    BEPS

    BASE EROSION AND PROFIT SHIFTING

    BRIEF INTRODUCTION
    BEPS


    BEPS refers to tax planning strategies that exploit gaps and mismatches in
    tax rules to artificially shift profits to low or no-tax locations where there is
    little or no economic activity

    While some of the current practices in BEPS are illegal, most practices are
    however legal according to the current law and regulations of individual
    countries
    IMPACT OF BEPS


    Current BEPS activities carried out by corporations have the following
    observed impacts:

    Undermines the fairness and integrity of tax systems – multinational
    corporations get benefits while domestic corporations cannot

    Serves as bad examples to local corporations

    Individual countries could receive less revenues, especially for less-
    developed countries
    INCLUSIVE COMPREHENSIVE
    FRAMEWORK


    Monitoring implementation of project actions

    develop a monitoring process for the four minimum standards – comply
    with the standards by corporations, level in playing fields, monitoring
    mechanisms are well developed, ensure the effectiveness of the filing and
    dissemination of country based reports,

    More than 85 countries have signed the BEPS instrument

    More than 135 countries and jurisdictions are collaborating on BEPS
    OECD BEPS WEBSITE


    https://www.oecd.org/tax/beps/
    PROJECT ACTIONS (BEPS PACKAGE)


    Explanation Statement

    There are 15 Project Actions:

    Action 1: Tax Challenges of the Digital Economy

    Action 2: Neutralizing the Effects of Hybrid
    Mismatch Arrangements

    Action 3: Designing Effective Controlled Foreign
    Company (CFC) Rules

    Action 4: Limiting Base Erosion Involving Interest
    Deductions and Other Financial Payments
    Project Actions


    Action 5: Countering Harmful Tax Practices More
    Effectively, Taking Into Account Transparency
    and Substance

    Action 6: Preventing the Granting of Treaty Benefits
    Inappropriate Circumstances

    Action 7: Preventing the Artificial Avoidance of
    Permanent Establishment Status

    Action 8 – 10: Aligning Transfer Pricing Outcomes
    With Value Creation
    Project Actions


    Action 11: Measuring and Monitoring BEPS

    Action 12: Mandatory Disclosure Rules

    Action 13: Transfer Pricing Documentation and
    Country-by-Country Reporting

    Action 14: Making Dispute Resolution Mechanisms More Effective

    Action 15: Developing a Multilateral Instrument to Modify Bilateral
    Tax Treaties
    IMPACT TO CORPORATIONS

    • Possible change of group structure


    • Shift of production and other functional units among countries
    • Modification of financial systems
    • Review of current transfer pricing policies
    • Re-design of transfer pricing documentation
    • Introduction of Risk Matrix Report and Impact Assessment
    Report for corporations
    IMPACT TO CORPORATIONS

    • Major issue –
    1. How to carry out tax planning on international basis that
    are legal and not opposing the views of individual
    countries
    2. How to prepare for future moves in view that BEPS
    actions could change from time to time among countries
    3. How to arrange for flexible financial structure in
    particular under BEPS
    NOT ONLY A CAT AND MOUSE GAME:
    TAX SAVVY COMPANIES CAN
    OUTCOMPETE
    Not engaging in tax avoidance may be a bad business
    strategy.

    VS
    Governments Companies Companies

    Profit 100 Profit 100


    Tax 30 Tax 15
    Net Profit 70 Net Profit 85
    Companies

    Tax Savvy
    = Winner!

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